Chip makers stock record quantities of raw materials to end shortages
Technology shortages are causing serious damage to the market, and the world’s largest chip manufacturers are stepping up to purchase as many raw materials as possible to alleviate this problem.According to reports Nikkei AsiaIn June, the raw material inventories of the world’s nine leading chip manufacturers hit a record high, valued at $64.7 million, as they continued to increase production.
The total inventory of these chip manufacturers, including TSMC, Intel, Samsung, Micron, SK Hynix, Western Digital, etc., is currently at a historical high. Since March 2019, the amount of raw materials in the total inventory has been steadily increasing, and the inventories of all these companies have increased by at least 24% than ever before.
Despite the large inventory of raw materials, the demand for semiconductor chips is still very high, which offsets the increase in production. This is largely due to the automotive industry, which is believed to buy far more chips than needed to make cars.
Traditionally, automakers use a “just in time” strategy for processors, which means they will order chips as needed. But now, many car companies plan to shift gears by holding inventory for many years to ensure that there is enough buffer to cope with the recurrence of shortages.
Although this is a good idea for automakers, it may become a big problem for future chipmakers. The need to have “artificial” chips means that future demand may drop significantly, which may cause chip manufacturers to lose a lot of money.
However, there are some ways to ensure that this does not happen. For example, Toyota hopes to create a new centralized inventory to monitor chip manufacturing output and the number of chips shipped to its storage location. This solution may be very useful for chip manufacturers, so that automakers will not over-buy chips and prevent large-scale demand droughts.
But the automotive industry is not the largest consumer of semiconductor chips, so the technology shortage is still mainly driven by the sales of home appliances, smart phones and computers.
Fortunately, chip manufacturers can now use large amounts of raw materials when needed. The problem is that the current fab capacity cannot maintain market demand.
Both Intel and TSMC are building new fabs in the United States, which should be a fatal blow to the technology shortage. All we have to do is wait a year or two until these facilities are online.